Case Studies
Bankruptcy
Lisa & Mathew
Circumstances
Lisa and Mathew qualified for bankruptcy as they didn’t have sufficient disposable income to honor their debts. This means that they were released from their €169,000 liability. Bankruptcy is granted in the High Court and is monitored by the Insolvency Service of Ireland for the duration, usually 12 months
- Married
- 2 children (11yrs & 13yrs)
- Former small business owners
- Lisa works part-time
- Mathew works full-time
- €169,000 in debt
- €1,200 rent per month
- €3,180 total income per month
Please note during the 12-month monitoring period, all adjudicated bankrupts must report to the Insolvency Service of Ireland (ISI) and must inform the ISI of any changes in their financial circumstances. A Bankruptcy Payment Order (max 3 years) may be granted where the income of a bankrupt exceeds reasonable living expenses during the 12 months bankruptcy term.
IMHO have an inhouse Personal Insolvency Practitioner who will assist debtors with bankruptcy applications and court representation.
Personal Insolvency Arrangement
Ariana & Patrick
Circumstances
Ariana and Patrick consulted a Personal Insolvency Practitioner (PIP). The PIP submitted a 5-year
joint formal proposal to all Creditors which got the couple lower mortgage payments each month
and an affordable plan to pay the credit union loan and credit card balance.
- Not Married
- No children
- Ariana works part-time as child minder
- Patrick works full-time as a retail assistant
- €3,350 total income per month
- €2,300 monthly mortgage repayments
- €150 monthly credit union loan repayments
- €7,000 credit card debt
- €34,000 in mortgage arrears
Split Mortgage
Mary & Joe
Circumstances
Mary and Joe’s bank agreed to a Split Mortgage. This means that 45% of the loan will be warehoused/parked, there will be no interest charged on this portion for the lifetime of the loan.
- Married
- 3 children (7yrs, 9yrs & 14yrs)
- Mary works full-time as retail assistant
- Joe works part-time as civil servant
- €4,420 total income per month
- €375,000 mortgage
- €11,000 mortgage arrears
Split Mortgage
Situation
Mary and Joe are married with 3 children aged 7, 9 & 14. Mary works full time in a well known retailer and Joe is a civil servant. They have a combined income of €4,000 per month and in addition receive child benefit of €420 per month. They have a tracker rate mortgage on their family home of €375,000 and the house is worth €310,000. Full repayments are €1,800. Due to wage cuts and additional taxes they are having difficulties paying their mortgage and are currently €11,000 in arrears.
They approached IMHO who obtained financial information from them and then met with them to discuss their circumstances.
Finances
- Income: €4,420
- Reasonable Living Expenses: €2,235.79 (based on ISI guidelines – without childcare)
- Childcare Expenses: €400
- Total: €3,400
- Available to repay debt: €1,020
Resolution
Based on the above information, and following a submission to the bank a split mortgage was agreed, the repayment figure is based on what the couple can afford each month.
As part of the Split arrangement Mary and Joe will make monthly capital and interest repayments of €1,000 per month on 55% of the loan.
Under the split arrangement 45% of the loan will be warehoused/parked, there will be no interest charged on this portion for the lifetime of the loan
Reduced Interest Rate
Situation
Susan and Andy are married with no children. Susan works part time as an administrator and Joe is a sales manager. They have a combined income of €2,900 per month. They have a mortgage on their family home of €300,000 and the house is worth €240,000. Full repayments are €1,750. Due to the loss of Susan’s full time job and additional taxes they are having difficulties paying their mortgage and are currently €17,400 in arrears. They have a variable rate mortgage on their mortgage of 3.95%.
They approached IMHO who obtained financial information from them and then met with them to discuss their circumstances
Finances
- Income: €2,900
- Reasonable Living Expenses: €1,712 (based on the guideline expenditure allowed by their bank)
- Available to repay debt: €1,188
Resolution
While some lenders offer rate reductions, the rate reduction is not 0.5% across the board, also the period of rate reduction varies, it can be from 3 to 6 years, and very much depends on individual circumstances.
Mortgage To Rent
Situation
Simon and Anne are married with a boy and a girl aged 4 & 14. Anne lost her job previously and is unemployed and Simon works part time in manufacturing. Previously he was a full time employee of the company but his hours have been cut in recent years. His hours are unlikely to increase. Simon has an income of €1,750 per month and in addition receive child benefit of €280 per month. They have a mortgage on their 3 bedroom family home of €315,000 and the house is worth €295,000. Full repayments are €1,950. Due to wage cuts and the loss of Anne’s job they are having difficulties paying their mortgage and are currently €17,500 in arrears.
They approached IMHO who obtained financial information from them and then met with them to discuss their circumstances.
Finances
- Income: €2,030
- Reasonable Living Expenses: €2,500 (based on the guideline expenditure allowed by their bank)
- Available to repay debt: €0
Resolution
The family want to remain in their home, their household income is within their Local Authority social housing scheme guidelines and the value of their home is less than €395k (designated higher threshold area – Meath address).
IMHO approached their lender and requested that they be considered for the Mortgage to Rent scheme. The Scheme allows for their home to be sold to an approved housing body and the family to remain in the property as social housing tenants.
In this circumstance the bank agreed that the price paid for the property by the approved housing body will be accepted in full and final settlement of the debt.
Affordable
Situation
Tony and Oonagh are married with 1 child aged 3. Tony works full time in an insurance company and Oonagh works 3 days per week in a well-known retailer. They have a combined income of €3,900 per month (Tony €2,500 and Oonagh €1,400) and in addition receive child benefit of €140 per month. They have a mortgage on their family home of €290,000 and the house is worth €310,000. Full repayments are €1,350. Due to wage cuts and additional taxes they are having difficulties paying their mortgage and are currently €9,000 in arrears.
They approached IMHO who obtained financial information from them and then met with them to discuss their circumstances.
Finances
- Income: €4,040
- Reasonable Living Expenses: €2,000 (based on the guideline expenditure allowed by their bank)
- Childcare Expenses: €600
- Total: €2,600
- Available to repay debt: €1,440
Resolution
As their mortgage is €1,350 per month the bank considered that the mortgage is affordable in full and refused to restructure it. However the issue of the arrears still required to be dealt with.
Following negotiation by IMHO the bank agreed to capitalise the arrears. This means that they are added back to the mortgage and repaid over the remaining lifetime of the loan. This means that the full mortgage repayment will increase. If the payment increased above would be affordable for the family i.e. above €1,403 a term extension of the loan would be required to make the monthly repayments affordable.
Unsustainable
Situation
Maurice are Genny are married with 4 grown up children. Maurice previously worked in the construction sector and Genny is unemployed. Maurice has not been able to return to work and both himself and Genny rely on social welfare of €406 weekly. Maurice also does some casual work earning circa €400 per month. Their family home is a six bedroomed property in Cavan.
They have a mortgage on their family home of €325,000 and the house is worth €445,000. Full repayments are €1,650. They are having severe difficulties paying their mortgage and are currently €57,400 in arrears. The bank has commenced legal proceedings to have the house repossessed. The case has been adjourned on two occasions and is due before the court again in 6 weeks.
They approached IMHO who obtained financial information from them and then met with them to discuss their circumstances.
Finances
- Income: €2,159.33
- Reasonable Living Expenses: €3,000 (based on the guideline expenditure allowed by their bank)
- Available to repay debt: €0
Resolution
In this circumstance there was no ability to make repayments to the mortgage and the mortgage was deemed unsustainable by the lender.
The family home did not qualify for inclusion in the Mortgage to Rent Scheme, 3 bedrooms in excess of family need, above valuation threshold of €305k (designated normal threshold area – Cavan address). The value of the property also placed the couple in a positive equity position.
Following negotiation with IMHO the bank agreed that the property was to be sold. The bank agreed to allow 6 months for the sale to complete and in addition they agreed to waive legal fees incurred if loan was redeemed in full prior to expiration of the 6 month agreement. The bank also agreed that if the loan was redeemed in full within 4 months of the agreement they would also reduce arrears by 25% (a saving of €14,350 to the couple).
Please Note
The advice of the IMHO is never sell or surrender a property without a written agreement and confirmation as to what happens the residual balance (if applicable) after the property is sold.